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Runic Games was founded in August 2008 by Travis Baldree, Max Schaefer, Erich Schaefer and Peter Hu.[5] The company formed specifically for the purpose of keeping the Mythos team together to develop a new action RPG video game as a "spiritual successor" to their previous project.[6] Following the dissolution of Flagship Studios in 2008, all 14 members of the Seattle team that developed Mythos signed onto Runic Games.[2][7]

Full production on the game started around November 2008, meaning that the game's total development period was approximately 11 months.[8] At the 2009 Game Developers Conference some members of the Runic Games team were present with an early version of their single-player game, at which point it was revealed that the title would be Torchlight.[9] One notable addition to the staff was Matt Uelmen, composer for Blizzard Entertainment's Diablo series. As of mid-2009, the company employed no fewer than 26 people.[5][10]

Gamasutra named Runic Games one of its "Top 5 Developers" of 2009 for the studio's ability to create the "highly-polished" Torchlight in only 11 months.[11] The company was also praised for its responsiveness to its player community, citing one particular incident:

Mere hours after a forum member mentioned that one of the game's camera effects left her unable to play sections of the games due to an uncommon eye condition, a Runic developer patched in a user toggle for the option -- at 8:00 am on a Sunday morning, no less.

Runic Games announced Torchlight II, a sequel that features multiplayer co-op. The company decided to develop the sequel to "give [the players] what they're asking for" in terms of a multiplayer experience, while serving as an intermediate step toward their planned MMORPG.[13] Torchlight II was released on September 20, 2012.[20]

Though not listed anywhere in their marketing materials,[21] Torchlight II requires a Runic Games account to play in Internet Multiplayer games.